IRS Letter Responds to Employee’s Preference for Driving During Pandemic
In a recent information letter concerning an employee who, due to COVID-19, was driving to work rather than using public transportation, the IRS said employees may apply unused commuter transit benefit amounts to parking benefits in certain circumstances. Specifically, the IRS letter states an employee “is not precluded from rolling over unused transit benefit amounts through the use of another qualified transportation fringe,” such as qualified parking, if the other fringe:
- Is offered by the employer’s plan; and
- Does not exceed the maximum monthly amount for the respective qualified transportation fringe benefit.
The letter sets forth the following additional limitations on such use:
- Amounts set aside under a compensation reduction agreement are not refundable other than by payment of another qualified transportation fringe under the employer’s plan; and
- The employee must have made a valid compensation reduction election (and not have been terminated) to use compensation reduction amounts for commuting expenses in future months.
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